1. 13 - 1Copyright 2008, The National Underwriter Company Business Liability Issues in Insurance  What is it?  Business liability is the risk exposure that any business entity assumes in its dealing with the public  Examples  Premises and operations liability  Products and completed operations liability Chapter 13 Risk Management For Financial Planners

2. 13 - 2Copyright 2008, The National Underwriter Company Business Liability Issues in Insurance  Advantages  Transfer the payment for liability of the risk  Premiums are tax deductible  Insurance company will handle most, if not all, of the legal and paper work  Insured need not spend time and resources to handle the problem  Insurance company can assist in loss control (before a loss occurs) Chapter 13 Risk Management For Financial Planners

3. 13 - 3Copyright 2008, The National Underwriter Company  Disadvantages  Loss of use of dollars spent on premiums  Bad publicity for the insured business resulting from a difficult insurer  Example – not willing to settle the claim quickly  Insured gives up control over the management and settlement of the claim Chapter 13 Risk Management For Financial Planners Business Liability Issues in Insurance

4. 13 - 4Copyright 2008, The National Underwriter Company  Disadvantages (cont’d)  If insurer becomes insolvent  Management and settlement of claims fallback on business  Financial protection for the insured is limited by the Commercial General Liability Form (CGL) exclusions and set policy limits  Not all liabilities will be covered Chapter 13 Risk Management For Financial Planners Business Liability Issues in Insurance

5. 13 - 5Copyright 2008, The National Underwriter Company  Business liability insurance  CG 00 01 and CG 00 02  Forms that provide insurance for most business liability exposures  CG 00 01 – Occurrence form  For coverage to apply, the injury or damage must occur during the policy period  Claims can be made anytime during or after the policy period  CG 00 02 – Claims made form  For coverage to apply, the injury or damage must occur during the policy period  Claims must be made during the policy period as well Chapter 13 Risk Management For Financial Planners Business Liability Issues in Insurance

6. 13 - 6Copyright 2008, The National Underwriter Company  Business liability insurance (cont’d)  Policy Structure for the CGL Forms  Insuring agreement  Contractual connection between the insured and the insurance company  Exclusions  Supplemental payments  amounts insurance company agrees to pay (in addition to the stated limits of insurance) for certain expenses incurred in handling and settling a claim or lawsuit against the insured  Who-is-an-insured clauses Chapter 13 Risk Management For Financial Planners Business Liability Issues in Insurance

7. 13 - 7Copyright 2008, The National Underwriter Company  Business liability insurance (cont’d)  Policy Structure for the CGL Forms (cont’d)  Limits of insurance section  Describes the amounts the insurer will pay  Stated on the declarations page  Conditions  Guidelines that the insurer and insured must follow as part of the contract  Definitions  Defining the terms in the contract Chapter 13 Risk Management For Financial Planners Business Liability Issues in Insurance

8. 13 - 8Copyright 2008, The National Underwriter Company  Limitations and exclusions  Bodily injury (BI), Property damage (PD) or personal and advertising injury  These are defined terms in the policy  If the injury or damage alleged does not match these definitions, then coverage will not apply for the claim  Injury and damage must take place in the coverage territory and during the policy period  How much the insurer will pay  Insured chooses the limits of coverage they will buy Chapter 13 Risk Management For Financial Planners Business Liability Issues in Insurance

9. 13 - 9Copyright 2008, The National Underwriter Company  Limitations and exclusions (cont’d)  Exclusions are standardized  Coverage A (BI and PD) has an exclusion for BI and PD expected or intended from the standpoint of the insured  Coverage A is based on occurrence – an accident – not intentional actions  Coverage B (personal and advertising injury)  Does apply to intended acts of the insured  Coverage is not without limitations  Criminal acts  Publishing information you know to be false  Exclusion via endorsements  To exclude certain exposures that may be better served via other insurance forms Chapter 13 Risk Management For Financial Planners Business Liability Issues in Insurance

10. 13 - 10Copyright 2008, The National Underwriter Company  Other types of insurance for business liability risks  For businesses with special exposures or exposures the insurance company does not wish to insure  Examples  Pollution liability  Injuries bases on discrimination, sexual harassment  Certain risks that should have a different liability form so that unique exposures are properly handled Chapter 13 Risk Management For Financial Planners Business Liability Issues in Insurance

11. 13 - 11Copyright 2008, The National Underwriter Company  Other types of insurance for business liability risks (cont’d)  Monitoring results  Have liability policies been applicable to losses and claims  Are the limits of protection adequate  Is the amount paid in premium cost effective  Are there new liabilities or liabilities no longer in existence since the policy was written  Have any claims and lawsuits been properly and satisfactorily handled by the insurer Chapter 13 Risk Management For Financial Planners Business Liability Issues in Insurance